Addressing the opening ceremony of the conference on "Global Value Chain in the 21st Century: Policy Implications on Trade, Investment, Statistics and Developing Countries" organised jointly by China's Ministry of Commerce, UNCTAD, OECD and WTO in Beijing today, UNCTAD Secretary-General Supachai Panitchpakdi urged more proactive policies by developing countries in areas such as industrial strategy for them to be able to benefit fully from the growing phenomenon of global value chains.
New forms of globalization have created production processes that are not confined to national borders. In this context, UNCTAD has been undertaking research on global value chains for a number of years. Under GVC arrangements, trade is no longer driven by the exchange of finished products among countries reflecting national factor endowments but rather by the combination of different factors of production with varying degrees of mobility organsied within the boundaries of the transnational corporation. Under these arrangements value-addition will occur in several different locations in different countries, but with a very unequal sharing of the benefits among these locations across the chain, Dr. Supachai observed.
Although the phenomenon presents new opportunities, developing countries need to take more ownership at each stage of the value chain in order to obtain full benefits, through such policy choices as appropriate investment promotion arrangements, and wage and industrial policies, with more policy space being accorded to developing countries in this regard to reflect their national conditions, Dr. Supachai said.
He added that the benefits that can accrue from being a part of global value chains is not automatic, and there is the danger of a "fallacy of competition" from the seemingly easy entry into the lower stages of a value chain which leads to countries not being able then to build capacity and move up the value chain but rather becoming stuck in a low-income or middle-income trap. Becoming part of the global value chain through wage compression and utilization of raw materials should not be considered as sufficient, and conscious policy choices have to be made at every step of the chain, from attracting appropriate forms of investment, the degree of opening up, the upgrading of skills, transfer of technology and know-how, wages, branding, marketing, distribution and sales.
Developing countries also need to be mindful that foreign direct investment (FDI) is footloose and can easily move on to newer locations with lower wages, and the spillover effects from FDI is not automatic, he cautioned. Therefore, focussed, proactive and well-planned policies are still required from governments to ensure that becoming part of the global value chain will yield sustainable and inclusive benefits for their populations and national economies, he concluded.
The Conference in Beijing was presided over by H.E. Mr. Wang Qishan, Vice-Premier of the People's Republic of China. Also addressing the opening plenary were Mr. Pascal Lamy, Director-General of the WTO, and Mr. Angel Gurria, Director-General of the OECD.
Policy Implications on Trade, Investment, Statistics and Developing Economies in Beijing, China
